International Political Economy
Lecture 1: What is International Political Economy?
2026-01-20
Liberalism
The core actors are individuals as producers and consumers
Free trade is a “positive-sum” game which makes all parties involved better off
Free markets are the most efficient way to allocate resources
Economics and politics are autonomous domains (and should not be mixed)
The government’s role should be limited to setting “fair” rules of the game and provide public goods (e.g., property rights protection, defense…) so that the market can flourish
Absence of conflict is natural: mutual economic interest from trade prevents wars
Marxism
The core actors are the classes: capitalists (owners of means of production) and workers (owners of labor)
The economic-political system is shaped by capitalism and conflicting economic interests
Politics is subordinated to economic forces
Capitalism expands globally to find new markets and exploitable labor \(\implies\) imperialism
Capitalism creates a hierarchical international system (core-periphery). This system maintains peripheral countries underdeveloped
Conflict is natural
Realism
The core actors are the states
States’ decisions are driven by power, its use and the desire to increase it relative to other states
Economics is subordinated to political forces
States can undermine free trade (e.g., reduce their engagement or monopolize parts of the economy) if this can strengthen their power vis-a-vis other states in other ways
Absence of conflict is possible if a single actor is so powerful to enforce rules \(\implies\) Hegemonic stability
(New) Institutionalism
The core actors are states
States have common interests, but self-interest prevents from pursuing it
They create institutions (codified “rules of the game”) to enforce cooperation for mutual benefit
Economics and politics interact through the incentives and rational choices of states
Absence of conflict (cooperation) is not natural, but can be achieved
